CMHC cutbacks announced

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The budget announcement quietly slipped in changes to government-backed mortgage insurance, including reductions to the amount of new guarantees CMHC will provide.

“The Government continues to adjust the housing finance framework to restrain the growth of taxpayer-backed mortgage insurance and securitization,” the budget report states. “These measures will support the stability of the housing sector and the financial system by increasing market discipline in mortgage lending. 

“They will also reduce taxpayer exposure to the housing sector without compromising the availability of reasonably priced mortgages.”

This should come as no surprise to a number of brokers, with Finance Minister Flaherty recently stating CMHC has evolved past its initial intention.

“Regrettably, CMHC became something rather more grand, I think, than it was intended to be,” Flaherty told reporters in December. “We’ll see over time what that role should be.”

Of course, the federal government has adjusted the rules for CMHC mortgage insurance four times in the past five years, including establishing a maximum amortization period of 25 years for mortgages with down payments less than 20 per cent.

However, Tuesday’s budget also announced a number of further changes to the Canadian Mortgage and Housing Corporation, which includes reducing the amount of new guarantees CMHC is authorized to provide.

Read on for the full list of changes.


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  • David O'Gorman on 2014-02-13 11:38:56 AM

    The idea of the Feds privatizing CMHC has to rank as one of the dumbest ideas of any government, anywhere.

    I am not the most ardent fan of CMHC. Over the last 12-14 years they have done or not done some terrifically stupid things, like matching the then GE Capital, with removing the cap of a maximum three months interest penalty(no IRD) on early payout of an insured mortgage...or insuring $900k mortgages on houses....or coming up with a building code requiring a water proof membrane under cedar shake shingles, which caused the shingles to rot in less than 10 years,without the membrane they rot in 50 years.....and lets not forget the over reliance on EMILI...a lot of dumb stuff.

    But they were around in the late 1970's when the oil boom went bust in Alberta. They had the money (ours) & the foresight to liquidate a huge foreclosed housing stock in an organized manner so that it rose with the market, it didn't make the market. At the same time private insurers like MICC & Ensmor folded or closed shop.

    During the 1980's & the early part of the 1990's, there was only CMHC. Private insurers would not take the risk of the Canadian market. Its small in dollars, huge in area & diverse in risk. When times are great, private insurers are here making money, when time are tough they fold or flee.

    In 1991-92 the whole Canadian economy was in the toilet, high unemployment, especially in the construction trades. Real estate values in many areas had dropped by 20% and CMHC came out with the 5% down, use your RRSP, to buy only new construction homes. A stroke of absolute genius at the time.Stimulating a rotten economy towards recovery.

    In early 2009 CMHC bought tens of billions of dollars of Canadian mortgage backed securities that Canadian banks were left holding because the market place would not buy anything related to MBSs.This act by CMHC also kept Canadian banks liquid.

    CMHC is one wonderful tool to have in a government's hand, if it is used properly and skillfully.
    That said, over the last 14 years the lack of management oversight, by two federal governments, of both political stripes, is responsible for the over stimulation of the economy by CMHC.

    The difference between a master craftsman and an apprentice is the knowledge to know when to use the the appropriate tool at the right time.CMHC is just the tool. Use of the tool & the skill with which it is wielded is up to CMHC senior management and the governments we elect.

    Any government that would sell/privatize a tool as useful to the economy and the people of Canada as CMHC, is made up of fools & political opportunists.

  • Gary MacLean on 2014-02-13 12:28:13 PM

    David O'Gorman I completely agree with your comments well put.

  • dan samson on 2014-02-13 12:48:53 PM

    excellent commentary and I agree whole heartly. I started my working career as a mortgage officer of the Royal Trust Co. (which did not make it thru one of the cycles) Cmhc has done an excellent job other than when they wanted to compete with the 'easy money privates'

  • @kiltedbroker on 2014-02-13 1:49:56 PM

    Well put David O'Gorman, learned a lot reading your comment.

  • Ron Butler on 2014-02-13 3:35:22 PM

    I am with David, there are likely some changes needed to CMHC but privatization is not the way.

  • LanceH on 2014-02-13 5:37:09 PM

    AGREED!! I'm mad to this day the Cons sold PetroCan. While not exactly the same, just imagine what could be done with a portion of the profits, and if prices get out of whack, the Gov gas station could arbitrarily reduce them. Canada Business Dev Bank is another jewel. Operating in the background, can step up - such as they did with the crash of 08/09, otherwise they hover quietly in the background. I'm actually starting to think of this as a preferred methodology in key sectors of public importance. Might this methodology work for the electricity sector? The education sector? Privates force Gov offices to be efficient, Gov is there if forces beyond control take things off track . . . a nice balance.

  • Patricia Boisjoli on 2014-02-13 6:44:22 PM

    Thank you Dave for speaking up!! I couldn't agree with you more!!

  • Jesse on 2015-10-05 4:32:55 PM

    All I know is I paid an extra 3.6 % for my home and then that is subject to interest from the bank. Its highly unfair and not required. This "CMHC" seems to just be there to lend people money who cannot afford a house in the first place. Maybe we should crack down on the banks instead. Oh but that would make the realtors and brokers poor, now wouldnt it? ;)

  • monoline lender on 2015-10-06 1:17:45 PM

    Very fair commentary Dave. We often question some of their moves but the crown corp has also done some very good things. Their sovereign guaranty gave investors comfort in covered bonds etc. in 2008 and through the financial crisis that allowed banks to maintain liquidity in extraordinary times. We all benefitted from this and most of us survived as a result. Ron is correct, privatization will not cure past errors or preclude future missteps. All in all CMHCs mandate and initiatives have benefitted the consumer, investor, lender and borrower.

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